Founded in 2016, Fisker, Inc. (FSR) is a designer and manufacturer of sustainable electric vehicles and advanced mobility solutions. Its shares have declined 14.6% over the past month on investors’ concern surrounding rising competition in the EV space.
FSR recently entered an agreement with Foxconn to develop a new breakthrough EV under “Project PEAR”. While the joint venture could enhance FSR’s manufacturing capabilities, it will require a significant amount of time before it begins generating revenue for the company.
Furthermore, the company will not record earnings growth until it begins production of its first automobile, the Fisker Ocean SUV, in the fourth quarter of 2022. In fact, analysts expect FSR’s EPS to decline 112.5% in 2021.
Click here to checkout our Electric Vehicle Industry Report for 2021
Here is what we think could influence FSR’s performance in the near term:
Lagging in the EV Race
FSR has not yet started producing and selling vehicles commercially. The company intends to start selling its Fisker Ocean vehicles in the fourth quarter next year. In fact, FSR plans to begin the production of its second EV model, Project PEAR, in partnership with Foxconn in 2023. While its peers, including Nio Inc. (NIO), Volkswagen AG (VWAGY), and XPeng, Inc. (XPEV) are intensifying their efforts to launch superior models and ramp up EV production, FSR’s Ocean SUV launch runs the risk of being overshadowed.
Global Chip Shortage to Mar Growth
While government initiatives worldwide to transition to zero-emission vehicles have certainly increased the demand for EVs, the near-term growth prospects of many companies in this sector, including FSR, look uncertain due to the global shortage of semiconductors. Since EVs are heavily dependent on these chips, the shortage could hurt EV manufacturers in the near term.
Bleak Financials
FSR reported $22,000 in revenue in the first quarter, ended March 31. Its total operating expenses rose 5.7% sequentially to $33.10 million. The company reported a $32.28 million non-GAAP adjusted loss from operations and a net loss of $176.84 million for this period. Its loss per share came in at $0.63.
Low Profitability
The company’s trailing-12-month cash from operations is negative $38.01 million, compared to the $209.05 industry average. Also, its trailing-12-month ROE, ROA and ROTC are negative 10.6%, 5.1% and 5%, respectively.
Unfavorable POWR Ratings
FSR has an overall D rating, which translates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.
The POWR Ratings also evaluate stocks by various components, such as Growth, Momentum, and Quality. FSR has a C grade for Growth. The stock’s weak near-term growth prospects are reflected in the Growth grade.
It has a D grade for Quality and Sentiment. The company’s poor profitability and analysts’ expectations of a weakening of its financials in the near term are in sync with these grades.
In addition to the grades we’ve highlighted, one can check out additional FSR ratings for Value, Stability and Momentum here.
FSR is ranked #43 of 53 stocks in the B-rated Auto & Vehicle Manufacturers industry.
There are several top-rated stocks in the same industry. Click here to view them.
Bottom Line
Even though FSR’s joint venture with Foxconn has raised investors’ hopes, given the time frame for production of its first and second EV models, it will be a while before the company starts generating revenues and profit. Furthermore, its lackluster financials in a competitive environment make it a highly speculative investment. So, we think it could be wise to avoid the stock now.
Click here to checkout our Electric Vehicle Industry Report for 2021
FSR shares were trading at $11.56 per share on Tuesday morning, up $0.34 (+3.03%). Year-to-date, FSR has declined -21.09%, versus a 11.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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